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Economy in Brief

Spanish Labor Markets Remain Vigorous
by Carol Stone October 27, 2006

Employment in Spain expanded "only" 3.7%, year-on-year, in Q3, less than the 4.2% and 4.9% of Q2 and Q1, respectively. Even so, this is still 2.3 times as fast as the growth in working-age population (age 16 and over) and unemployment continues to fall. In Q3, the unemployment rate was just 8.2%, the lowest since Q2 1979, more than 27 years ago. Further, at that time, the labor force participation rate was only 49.3%, about 9 points lower than the latest 58.4%.

The industrial structure of Spanish employment somewhat resembles that in many Western countries. The number of "industry" jobs has been nearly flat for the last few years. But as seen in the second graph, those jobs had been growing before this: from 1996 to 2002 they expanded at more than a 3.5% annual rate. At the same time, in all of Europe, industry employment was flat, and since the middle of 2001 it has fallen consistently. The service sector in both regions has shown gains, though. For all of Europe, this expansion has been between 2% and 3%, with some slowing recently. In Spain, though, these jobs have been growing at about 5%, and recent periods have maintained that pace. Employment opportunities in Spain look favorable.

On the unemployment side of the ledger, we can't help but recall the riots in France among young frustrated "wannabe" workers just about a year ago. What's the situation in Spain? It seems to be some better. Unemployment rates for ages under 25 are far higher than for the general population, to be sure, with Q3 at 16.9%. But this level includes some improvement. Two years ago, the rate was 21.6%. In the year from Q3 2004 to Q3 2005, employment among this group actually surged by 8.7%; it has held steady at last year's level across the latest four quarters. The resulting unemployment conditions are shown in the last graph, which contains harmonized data compiled by Eurostat and reported yesterday through September. Spain's youth unemployment is now about equal to that of Europe as a whole, a substantial improvement relative to the far higher rates of three years ago and more.

Spain, NSA, Millions 3Q 2006 2Q 2006 Q3 2005 2005 2004 2003
Employment 19.90 19.69 19.19 18.97 17.97 17.30
  Industry 3.29 3.29 3.31 3.28 3.21 3.20
  Construction 2.59 2.52 2.40 2.36 2.25 2.10
  Services 13.10 12.93 12.49 12.34 11.52 11.00
Unemployment 1.76 1.84 1.76 1.91 2.21 2.24
Unemployment Rate (%) 8.2 8.5 8.4 9.1 11.0 11.5
Participation Rate (%) 58.4 58.3 57.4 57.4 56.4 55.5
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